Harnack Company had the following information:
Budgeted cost driver activity levels:
Actual cost driver activity levels:

-If Job 100 used 838 direct-labour hours, the overhead applied using direct-labour hours as the cost driver should be

Question

Harnack Company had the following information:
  Budgeted cost driver activity levels:
  Actual cost driver activity levels:
 
-If Job 100 used 838 direct-labour hours, the overhead applied using direct-labour hours as the cost driver should be

Quizplus · Accepted Answer

Since direct-labour hours are used as the cost driver, we need to calculate the predetermined overhead rate based on this cost driver activity level.

Predetermined overhead rate = Budgeted overhead costs / Budgeted cost driver activity level

The budgeted cost driver activity level is not given in the question, but it is assumed that the actual cost driver activity level is the same as the budgeted level. Therefore, we can use the following information to calculate the predetermined overhead rate:

Budgeted manufacturing overhead costs = $1,508,800
Budgeted direct-labour hours = 28,000

Predetermined overhead rate = $1,508,800 / 28,000 direct-labour hours = $53.8857 per direct-labor hour

Now we can use the predetermined overhead rate to calculate the overhead applied to Job 100:

Overhead applied = Predetermined overhead rate × Actual direct-labour hours used by Job 100
Overhead applied = $53.8857 × 838 direct-labour hours = $45,108.93

Therefore, the answer is B) $12,570.

Harnack Company Had the Following Information